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- Title
Corporate Cash Holdings and Acquisitions.
- Authors
Lie, Erik; Liu, Yixin
- Abstract
Abstract: We find that acquirers’ announcement returns decline with their cash holdings, but only when at least part of the payment is in the form of stock. We further find evidence that acquirers that use stock payment are overvalued, especially when they have excess cash that they could have used instead. Collectively, our results suggest that investors interpret announcements of stock acquisitions as a signal that the acquirers’ equity is overvalued and that high cash holdings intensify this signal. However, our results are inconsistent with the common belief that cash holdings induce value‐destroying acquisitions.
- Subjects
UNITED States; MERGERS &; acquisitions; CASH position of corporations; CORPORATE debt; CASH management; LEVERAGED buyouts
- Publication
Financial Management (Wiley-Blackwell), 2018, Vol 47, Issue 1, p159
- ISSN
0046-3892
- Publication type
Article
- DOI
10.1111/fima.12185